Vardhman Textiles posted a weak Q4FY20 performance due to lockdown impact in second half of March. Consolidated revenues fell 9.5% YoY to Rs. 1596 crore due to 10% fall in textile segment. Though gross margins improved 340 bps YoY to 48.5% owing to lower input cost, negative operating leverage led to a fall in EBITDA margin by 80 bps to 14.1% with EBITDA down 15% to Rs. 225.1 crore. Hence, PAT fell 18% YoY to Rs. 149 crore.
Valuation & Outlook
Vardhman is among the few textile companies that have been able to maintain a debt equity ratio below one despite continuous capacity addition. Though near term financial performance is expected to be dented owing to low domestic demand, we expect VTL to tide over the same owing to its strong balance sheet and long standing relationship with marquee clients, which would enable a gradual demand recovery when the situation normalises. Uncertainty in international trade owing to trade disputes and geopolitical issues can subdue the financial performance. However, due to its strong b/s (FY20 debt equity of 0.3x), the stock is better placed than peers to wade through the current turbulent market conditions. We downgrade from BUY to HOLD rating with a target price of Rs. 700 (7x FY22E earnings).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_VardhmanTextiles_CoUpdate_Jun20.pdf
Shares of VARDHMAN TEXTILES LTD. was last trading in BSE at Rs.663.8 as compared to the previous close of Rs. 647. The total number of shares traded during the day was 140 in over 43 trades.
The stock hit an intraday high of Rs. 664.1 and intraday low of 649.1. The net turnover during the day was Rs. 91736.